ACCOUNTING TAX QUESTION

Multiple choice

1. Shock Inc. has several uncertain tax positions this year. It should do which of the following:

a. Determine if the probability of the position being sustained upon IRS challenge is greater than 50%.

b. Determine the largest dollar amount of benefit of the position that has a greater than 50% chance of being realized upon settlement.

c. For financial accounting purposes, record the benefit calculated in b.

d. All of the above.

2. Bevco incurred start-up expenditures while investigating the acquisition of a business. With respect to such expenditures, Bevco:

a. Can expense them in the year incurred

b. Must capitalize them and deduct them in the year of liquidation

c. Can expense the first $5,000 in the year incurred and elect to amortize the remaining costs over 180 months.

d. Must capitalize them but may elect to amortize them over 50 months.

3. XYZ is a corporation. It needs to raise some capital and is uncertain whether to issue debt or equity. Wchich of the following statements is true?

a. Both interest payments and dividned payments are nor deductible as expenses.

b. Interest payments are deductible but dividend payments are not deductible as expenses.

c. Principlal repayment and stock retirement are deductible expenses.

d. The shareholders (noncorporate and corporate) are indifferent as to whether they receive interest or dividends.

e. Alll of the above are true.

f. None of the above are true.